High-end home goods market struggles, too

August 28, 2008

San Francisco-based Williams-Sonoma, parent of upscale home decor and kitchen retailers including Pottery Barn and West Elm, saw net earnings falter in the second quarter, down 29 percent to $18.4 million compared with $26 million in the same period last year.

Net sales fell 5 percent to $819.6 million from $859.4 million in the year-ago period. Comparable-store sales fell 11 percent.

Howard Lester, chairman and CEO of Williams-Sonoma, blamed the poor performance on a “deteriorated” macroeconomic environment in the second quarter.

“As we look forward to the third quarter and balance of the year -- considering these trends -- it is extremely difficult to know how the consumer will respond in the back half of the year,” Lester said. “While our history would say that trends would improve, what we are seeing today does not support that premise.”

Pottery Barn and Pottery Barn Kids stores showed the steepest declines, with comparable-store sales down 16 percent and 13.5 percent respectively. West Elm, Williams-Sonoma and Williams-Sonoma Home banners performed better than the company average.

The retailer’s combined direct-to-consumer net sales, including catalog and Internet sales, fell 4.3 percent to $356.4 million. The direct-to-consumer segment was hit with a $2.6 million one-time charge because of a product recall.

In the first and second quarters combined, Williams-Sonoma opened 28 new stores and closed 15 stores, including six Pottery Barn and nine Williams-Sonoma locations. The company opened five new West Elm stores, a property that sells home decor items at mid-level price points, as opposed to the higher price points at Pottery Barn and Williams Sonoma Home.

At the end of the second quarter, the company operated 613 stores in the United States, as well as seven direct mail catalogs and six e-commerce sites.